Mr Rudd has long insisted he will not challenge the prime minister for the leadership.

After announcing the ballot during question time, a distraught-looking Ms Gillard turned to the opposition and said: "In the meantime, take your best shot."

Ms Gillard, Australia’s first woman prime minister, failed to win an outright majority at the 2010 election and has since struggled in the polls. Labor is set for a wipeout at the election, which is currently scheduled for September 14.

Mr Rudd has a higher public approval than Ms Gillard but has struggled for support within his party. He challenged for the leadership last year but lost a party ballot against Ms Gillard.

Ms Gillard’s authority fell away as a key backer and senior minister, Simon Crean, withdrew support for her and backed Mr Rudd as prime minister.

Mr Crean, a former party leader, said Labor was destined to lose this year’s election and a change of leader was necessary to avoid ongoing internal infighting.

“Something needs to be done to resolve this deadlock once and for all,” he said.

“I don’t want any more games… This is a very regretful position for me. This is not personal. This is about the party, its future and the future of the country.”

Mr Crean said he had not spoken to Mr Rudd but urged the former prime minister to have “the courage of his conviction and belief” and stand for the leadership.

The Opposition leader, Tony Abbott, said Labor was no longer fit to govern the country.

“This is a government in deadlock,” he told Parliament. “This is a government in crisis.